Personal Credit Cards Versus Business Cards: Which Should You Use for Business Expenses?

One of the most popular ways to self-fund a small business is to bootstrap the business. Essentially, bootstrapping means using your own money to pay for a small business instead of taking out a loan. You may dip into your personal savings, tap into existing retirement funds using Rollovers for Business Start-ups (ROBS), or occasionally use personal credit cards to cover expenses associated with the startup.

As the business grows over time, entrepreneurs will obtain a federal tax ID that enables them to open a business bank account. This allows the business to start establishing business credit which is separate from the owner’s personal credit. At this point, you may wonder if you should use personal credit cards or switch to business cards to pay for business expenses.

While we cannot personally offer financial advice, the best practice is to separate these expenses. Here are some clear advantages that come with keeping personal and professional purchases on separate credit cards.

1. Separate cards makes it easier to track expenses.

Imagine that you are charging everything to personal credit cards. Comingling all personal and business expenses on one card makes it difficult to tracking spending habits. Plenty of long nights are ahead of you as you attempt to document which purchases are specific to you or the business.

And what happens if you don’t organize your records? Attempting to report these expenses, accumulated year-round and unorganized, will quickly become a nightmare for you and your accountant during tax season.

Look at it from the perspective of opening a business bank account. When an entrepreneur opens a business bank account, they are creating an account that is separate from their personal bank account. This account is specific for the business and its transactions.

Business cards work the same way. Opening a business credit card allows entrepreneurs to separate expenses. Personal expenses will be reflected on personal credit cards while business expenses are tracked on business cards. Overall, having this separation makes it easier to track and monitor expenses for recordkeeping purposes.

2. Business cards allow you to build business credit.

Opening a business bank account means you can start building business credit. However, it’s important to note that using personal credit cards cannot help you build business credit. To build business credit, you must treat business cards with the same care and consideration you would when responsibly using personal credit cards.

How can you begin building business credit after opening a business card? Start by making payments on time for all busines-related purchases. Ideally, pay the balance in full as often as possible. This allows you to work your way towards building a good business credit score.

It also helps lay out the groundwork that allows your business to reach various future goals. For example, entrepreneurs that seek investors for funding will need proof of a good credit score. This score shows investors that your business is in good financial health. As such, the business is an attractive candidate for a loan or additional capital.

3. Separate cards help protect your personal credit.

Some entrepreneurs may not realize this, but it is possible that your personal credit score can be dinged for business purchases made on personal credit cards.

Here’s how it works. Personal credit score algorithms consider credit card utilization and payment history as they calculate your score. Let’s say you max out a personal credit card with a business expense. As a result, your score may drop. Similarly, your personal credit score may be negatively impacted if you are late on a monthly payment.

Rather than risk being held personally liable for business debts — or possible legal trouble — open a business card to keep from harming your personal credit.

4. Business credit cards do come with rewards.

One of the most common reasons why entrepreneurs are reluctant to open a business card ties in with rewards. Personal credit cards provide cardholders with a wide range of benefits including 0% interest rates, cashback, and travel rewards.

However, most business cards do have perks. They are tailored specifically for business owners. Here are a few common benefits.

  • Welcome offers and sign-up bonuses.
  • Free employee cards. These cards are ideal if you have employees working at your business. Business owners may monitor and track employee spending. There is peace of mind in knowing employees are using business cards instead of the owner’s personal credit cards.
  • Low interest rate periods.
  • Rewards. Like personal credit cards, business cards may also offer rewards in the form of cashback, travel, shipping, advertising, and merchandise.  
  • Additional promotions. If the financial institution has established a promotion with an approved partner, the company may be able to provide the cardholder with additional special rates and perks.

Ready for a business credit card?

By now, you may be warming up to the idea of a business card that can allow you to build a healthy credit score for your business.

Even though we cannot offer financial advice, we do recommend speaking with a trusted financial professional. Let the financial expert know that you are interested in opening a business credit card. Ask any questions you may have about the process. Discuss the card options that are the best fit for you and your business. Then, determine which card you will open and use for the company.

Remember to track your spending habits, keep only business expenses on your business card, and make payments on time each month. As a result, you will build a strong business credit score.

Let’s help you apply for a federal tax ID to open a business bank account. File for an employer identification number (EIN) with MyCorporation today. Visit us at or call us at 877-692-6772.